SeaChange International Reports Fourth Quarter and Full Year Fiscal 2012 Results

Provides Positive Earnings Outlook for Fiscal 2013

ACTON, Mass.--(BUSINESS WIRE)--
SeaChange
International, Inc. (NASDAQ: SEAC), an industry leading multi-screen
video software company, today reported revenue of $51.7 million
(excluding $2.4 million in revenues related to discontinued operations)
and a non-GAAP income per share from continuing operations of $0.18 for
the fourth quarter ended January 31, 2012. In comparison, fourth quarter
fiscal 2011 revenue was $57.9 million and non-GAAP income per share from
continuing operations was $0.19, respectively. The Company's fourth
quarter and full year financial results reflect the impact of its
previously announced agreement to sell its former broadcast servers and
storage business while retaining its video streaming software and
related hardware business; accordingly, the Company has reflected this
business as discontinued operations in its financial statements for
fiscal 2012 and for comparative purposes in prior periods. The Company
posted a GAAP loss from continuing operations for the fourth quarter of
fiscal 2012 of approximately $3.5 million compared with GAAP income from
continuing operations of $11.2 million for the fourth quarter of fiscal
2011. Included in the fourth quarter fiscal 2012 loss from continuing
operations were restructuring charges of $3.1 million, primarily related
to headcount reductions, and $1.8 million of earn-out expenses related
to prior acquisitions, whereas in the fourth quarter of fiscal 2011, the
Company recorded a gain on the sale of an affiliate for $1.9 million.

For the fiscal year ended, January 31, 2012, the Company posted total
revenues of $197.7 million, which was approximately $4.0 million lower
than total revenues of $201.7 million for fiscal 2011. However, non-GAAP
income from continuing operations for fiscal 2012 was $16.4 million, or
$0.51 per share, compared with non-GAAP income from continuing
operations of $15.7 million, or $0.49 per share, for the same prior
period. The Company posted a GAAP loss from continuing operations of
approximately $1.3 million in fiscal 2012 compared to GAAP income from
continuing operations of $31.6 million for fiscal 2011, as that year
included a $27.1 million pre-tax gain on the sale of the Company's
equity investment in Casa Systems, Inc. and InSite One, Inc. Included in
the Company's total fiscal 2012 loss from continuing operations are
costs related to restructuring charges, primarily as a result of
headcount reductions, and earn-out expenses related to prior
acquisitions which together totaled approximately $6.6 million.

"With intense focus on execution, we ended fiscal 2012 with our
strongest quarterly operating performance of the year," said Raghu Rau,
Chief Executive Officer, SeaChange. "Our focus in fiscal 2013 is on the
execution of our strategy to transform the Company into a pure-play
software provider, lowering our overall cost structure, delivering
industry leading, next generation solutions and achieving superior
financial results. We recently announced the divestiture of our
broadcast servers and storage business and are actively engaged in the
potential divesture of other non-core assets that do not fit into our
long-term business strategy."

Mr. Rau continued, "In addition to the $ 5.0 million in annualized cost
reductions announced earlier this year and the significant reductions in
operating expenses as a result of the divestiture of the broadcast
servers and storage business, we expect further operating expense
reductions in the first half of this year through product and market
rationalization and reductions in general and administrative costs. We
will continue to invest significantly in research and development by
moving investments from legacy to next generation products and building
our intellectual property. In fiscal 2013, SeaChange will become a
leaner and more agile company focused on bringing new products to market
that deliver a competitive advantage to our service provider customers
and drive increased value for our shareholders."

The Company ended fiscal year 2012 with cash, cash equivalents and
marketable securities of $93.8 million compared to $88.9 million at the
end of the third quarter of fiscal 2012. The increase in cash was
primarily attributable to cash generated from operations.

Annual Outlook:

"We are excited about the prospects for a transformed SeaChange in
fiscal 2013," said Mr. Rau. "We anticipate full year fiscal 2013 total
revenues to be in the range of $188 million to $200 million with
software revenues to be in the range of $150 million to $160 million and
media services revenues to be in the range of $38 million to $40
million. We also anticipate full year non-GAAP total operating income to
be in the range of $19.5 million to $23.5 million as we anticipate the
software segment accounting for $17 million to $20 million and media
services segment accounting for $2.5 million to $3.5 million of this
range. For the first quarter of fiscal 2013, we expect software revenues
to be in the range of $35 million to $37 million taking into account
certain product and market rationalization efforts, including exiting
unprofitable products and markets, and media services revenues to be in
the range of $7.8 million to $8.2 million."

The Company will host its fourth quarter and full year fiscal 2012
conference call on Thursday, March 29, 2012 at 8:30 a.m. E.T. The live
webcast can be accessed at www.schange.com/ir.
Supplemental financial information and prepared remarks for the
conference call will be posted to the Investor Relations section of our
website simultaneously with this press release.

About SeaChange International

Ranked among the top 250 software companies in the world, SeaChange
International (NASDAQ: SEAC) enables transformative multi-screen video
services through an open, cloud-based, intelligent software platform
trusted by cable, IPTV and mobile operators globally. Personalized and
fully monetized video experiences anytime on any device, in the home and
everywhere, are the product of the Company's superior back office,
advertising, content and home gateway offerings.

SeaChange's hundreds of customers are many of the world's most powerful
media brands including all major cable operators in the Americas and
Europe, and the largest telecom companies in the world. Headquartered in
Acton, Massachusetts, SeaChange is TL 9000 certified and has product
development, support and sales offices around the world. Visit www.schange.com.

Safe Harbor Provision

Any statements contained in this press release that do not describe
historical facts, including without limitation statements regarding the
divestiture of the Broadcast Servers and Storage business unit,
including the potential impact on the Company, the Company's business
focus and future financial performance, are neither promises nor
guarantees and may constitute forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. Any
such forward-looking statements contained herein are based on current
assumptions and expectations, but are subject to a number of risks and
uncertainties that may cause actual results to differ materially from
expectations. Factors that could cause actual future results to differ
materially from current expectations include the following: the
continued growth, development and acceptance of the multi-screen video
market; the loss of one of the Company's large customers; the ability of
the Company to transition to a pure-play software company; the
effectiveness of the Company's cost-cutting measures; the uncertainties
introduced by our evaluation of strategic alternatives; the cancellation
or deferral of purchases of the Company's products; the length of our
sales cycles; the Company's ability to manage its growth; the ability of
the Company to successfully sell its Broadcast Servers and Storage
business unit and non-core assets; the effectiveness of the Company's
disclosure controls and procedures and internal controls over financial
reporting; the Company's ability to protect its intellectual property
rights and the expenses that may be incurred by the Company to protect
its intellectual property rights; an unfavorable result of current or
future litigation; content providers limiting the scope of content
licensed for use in the video-on-demand market; the Company's ability to
successfully introduce new products or enhancements to existing products
on a timely basis; the Company's ability to compete in its marketplace;
the Company's ability to respond to changing technologies; the risks
associated with international sales and operations; changes in the
regulatory environment; the Company's ability to integrate the
operations of acquired subsidiaries; the Company's ability to hire and
retain highly skilled employees; and increasing social and political
turmoil.

Further information on factors that could cause actual results to differ
from those anticipated is detailed in various publicly available
documents made by the Company from time to time with the Securities and
Exchange Commission, including but not limited to, those appearing under
the caption "Certain Risk Factors" in the Company's Annual Report on
Form 10K filed on April 14, 2011. Any forward-looking statements should
be considered in light of those factors. The Company cautions readers
not to place undue reliance on any such forward-looking statements,
which speak as of the date they are made. The Company disclaims any
obligation to publicly update or revise any such statements to reflect
any change in Company expectations or events, conditions or
circumstances on which any such statements may be based, or that may
affect the likelihood that actual results may differ from those set
forth in the forward-looking statements.

Use of Non-GAAP Financial Information

To supplement our financial results presented in accordance with
Generally Accepted Accounting Principles (GAAP), this press release and
the accompanying tables contain certain non-GAAP financial measures that
we believe are helpful in understanding our past financial performance
and future results. Our non-GAAP financial measures are not meant to be
considered in isolation or as a substitute for comparable GAAP measures
and should be read in conjunction with our consolidated financial
statements prepared in accordance with GAAP. Our management regularly
uses our supplemental non-GAAP financial measures internally to
understand and manage our business and make operating decisions. Our
non-GAAP financial measures include adjustments based on the following
items, as well as the related income tax effects and adjustments to the
valuation allowance:

Revenue: Business combination accounting
rules require us to account for the fair value of customer contracts
assumed in connection with our acquisitions. In connection with the
acquisitions of eventIS Group B.V. on September 1, 2009, and VividLogic,
Inc. on February 1, 2010, the book value of our deferred software
revenue was reduced by approximately $6.0 million in the adjustment to
fair value. Because these customer contracts may take up to 18 months to
complete, our GAAP revenues subsequent to these acquisitions do not
reflect the full amount of software revenues on assumed customer
contracts that would have otherwise been recorded by eventIS Group
B.V. and VividLogic, Inc. In addition, we accelerated revenue
recognition on a significant terminated contract in fiscal 2011. We
believe these adjustments are useful to investors as a measure of the
ongoing performance of our business because we have historically
experienced high renewal rates on similar customer contracts, although
we cannot be certain that customers will renew these contracts.

Stock-based compensation expenses: We have
excluded the effect of stock-based compensation and stock-based payroll
expenses from our non-GAAP operating expenses and net income measures.
Although stock-based compensation is a key incentive offered to our
employees, we continue to evaluate our business performance excluding
stock-based compensation expenses. Stock-based compensation expenses
will recur in future periods.

Amortization of intangible assets: We have
excluded the effect of amortization of intangible assets from our
non-GAAP operating expenses and net income measures. Amortization of
intangibles is inconsistent in amount and frequency and is significantly
affected by the timing and size of our acquisitions. Investors should
note that the use of intangible assets contributed to revenues earned
during the periods presented and will contribute to future period
revenues as well. Amortization of intangibles assets will recur in
future periods.

Acquisition related costs: We incurred
significant expenses in connection with our acquisitions of
eventIS Group B.V. and VividLogic, Inc. and also incurred certain other
operating and non-operating expenses, which we generally would not have
otherwise incurred in the periods presented. Acquisition related and
other expenses consist of transaction costs, costs for transitional
employees, other acquired employee related costs, integration of related
professional services and changes in contingent liabilities related to
estimated earn-out payments. We believe it is useful for investors to
understand the effects of these items on our total operating expenses.

Restructuring: We incurred significant
expenses in connection with selected headcount reductions, a write-down
of inventory to net realizable value reflecting the discontinuance of
certain inventory components, and the disposal of fixed assets. We
believe it is useful for investors to understand the effects of these
items on our total operating expenses.

Strategic alternatives-related costs: We
incurred significant legal and other professional fees in connection
with the Company's review of strategic alternatives. We believe it is
useful for investors to understand the effects of these items on our
total operating expenses.

Income from sale of investments in affiliates:
For fiscal 2011 only, this reflects the gain, excluding any tax effects,
on the sale of our investment in Casa Systems. This is considered a
one-time event and not included in the financial results of our
continuing operations.

Impairment of asset held for sale: We
incurred a significant write-down of an owned property in connection
with the divesture of our former servers and storage business segment.
We believe it is useful for investors to understand the effects of this
item on our other expenses.

Income tax expense (benefit): The income
tax adjustment reflects the effective tax rate for the year in which the
non-GAAP adjustment occurs and excludes any changes in the tax valuation
allowance.

SeaChange International, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share data)

January 31, 2012

January 31, 2011

Assets

(unaudited)

Cash and marketable securities

$93,780

$

86,196

Accounts receivable, net

55,145

54,487

Inventories, net

10,218

11,041

Prepaid expenses and other current assets

10,760

10,731

Assets held for sale

646

-

Property and equipment, net

30,566

34,858

Goodwill and intangible assets, net

87,401

94,985

Other assets

5,054

7,124

Assets related to discontinued operations

5,465

5,769

Total assets

$

299,035

$

305,191

Liabilities and Stockholders' Equity

Accounts payable and other current liabilities

$

31,914

$

31,953

Deferred revenues

36,473

40,643

Other long term liabilities

9,204

12,392

Deferred tax liabilities and income taxes payable

7,727

7,735

Liabilities related to discontinued operations

2,779

3,326

Total liabilities

88,097

96,049

Total stockholders' equity

210,938

209,142

Total liabilities and stockholders' equity

$

299,035

$

305,191

SeaChange International, Inc.

Condensed Consolidated Statement of Operations - Unaudited

(in thousands, except per share data)

Three Months Ended

Twelve Months Ended

January 31,2012

January 31,2011

January 31,2012

January 31,2011

Revenues

$

51,697

$

57,883

$

197,705

$

201,687

Cost of revenues

25,387

26,312

99,693

98,832

Gross profit

26,310

31,571

98,012

102,855

Operating expenses:

Research and development

9,984

10,340

40,692

44,569

Selling and marketing

4,812

5,156

21,619

21,055

General and administrative

5,623

6,076

24,116

23,647

Amortization of intangibles

955

847

3,923

3,359

Acquisition costs

1,795

430

3,312

764

Restructuring

3,095

53

3,316

6,997

Total operating expenses

26,264

22,902

96,978

100,391

Income from operations

46

8,669

1,034

2,464

Gain on sale of investment in affiliate

-

1,883

-

27,071

Other expense, net

(730

)

(495

)

(358

)

(418

)

(Loss) income before income taxes and equity (loss) income in
earnings of affiliates

For GAAP purposes, stock-based compensation is included in the
following expense categories:

Three Months Ended

Twelve Months Ended

January 31,2012

January 31,2011

January 31,2012

January 31,2011

Cost of revenues

$ 22

$ 183

$ 405

$ 330

Research and development

168

123

73

392

Selling and marketing

(396)

476

609

746

General and administrative

(3)

750

1,782

1,252

Total stock-based compensation

$ (209)

$ 1,532

$ 2,869

$ 2,720

(4)

The intangible assets recorded at fair value as a result of our
acquisitions are amortized over the estimated useful life of the
related asset.

Amortization expense related to intangible assets is included in
the following expense categories:

Three Months Ended

Twelve Months Ended

January 31,2012

January 31,2011

January 31,2012

January 31,2011

Cost of revenues:

$ 519

$ 582

$ 2,158

$ 1,986

Operating expenses:

955

847

3,923

3,359

Total amortization of intangibles

$ 1,474

$ 1,429

$ 6,081

$ 5,345

(5)

We incurred expenses in connection with our acquisitions which
would not have otherwise occurred in the periods presented as part
of our operating expenses.

(6)

We incurred charges due to the restructuring of our business
including severance charges, write-down of inventory and disposal
of fixed assets, which we generally would not have otherwise
incurred in the periods presented as part of continuing operations.

(7)

We incurred legal and other professional fees in connection with the
Company's review of strategic alternatives.

(8)

Reflects the gain on the sale of the equity investment in Casa
Systems and InSite One, Inc.

(9)

We incurred an impairment charge from the write-down of building
held for sale.

(10)

The non-GAAP income tax adjustment reflects the effective income
tax rate in which the non-GAAP adjustment occurs and any exclusion
of changes in the tax valuation allowance.

SeaChange is providing a copy of these prepared remarks in combination
with its press release. This process and these remarks are offered to
allow investors and analysts additional time and detail for analyzing
our financial results in advance of our quarterly and full year
conference call. As previously scheduled, the conference call will begin
today, March 29, at 8:30 a.m. E.T. and will include comments followed by
questions and answers. These prepared remarks will not be read on the
call.

The conference call may be accessed using the following information:

-Telephone: 877-618-0011 (U.S.) and 973-200-3380 (international)-
Conference ID: 591 590 81- Live webcast: www.schange.com/IR
(An archived recording will be available at this site.)

Fiscal 2012 Fourth Quarter and Full Year Financial
Discussion

Revenues:

Total revenues for the fourth quarter of fiscal 2012 amounted to $51.7
million, which were $6.2 million or 10.7% lower than revenues of $57.9
million recorded in the fourth quarter of last year. From an operating
segment perspective, revenues from the Company's Software segment for
the fourth quarter were $43.3 million which were $8.2 million or
approximately 16% lower than revenues of $51.5 million for the fourth
quarter of fiscal 2011. The primary reasons for the decrease in Software
revenues quarter over quarter were due to lower service revenues, as the
prior year included a $4.6 million adjustment related to the
acceleration of deferred maintenance revenue from the deactivation of
the VOD systems at a customer, and the Company also experienced lower
VOD server shipments year over year.

The Media Services segment generated revenues for the fourth quarter of
fiscal 2012 of $8.4 million which were $2.0 million or approximately 31%
higher than revenues of $6.4 million in the fourth quarter of fiscal
2011. The increase in Media Services revenues in this year's fourth
quarter compared to last year was the result of recent contract wins in
Latin America and Eastern Europe.

Total revenues for the full year ended 2012 amounted to $197.7 million,
which were $4.0 million or 2.0% lower than revenues of $201.7 million
recorded in the same prior period. From an operating segment
perspective, Software revenues for the full year fiscal 2012 amounted to
$164.8 million, which were $8.9 million or approximately 5.1% lower than
the $173.7 million of revenues generated in fiscal 2011. The primary
reasons for the decrease in Software revenues year over year were due to
lower VOD server revenues and the prior year maintenance adjustment
described above.

For the full year fiscal 2012, the Media Services segment generated
revenues of $32.9 million which was $4.9 million or approximately 17.5%
higher than revenues of $28.0 million for the same prior period. The
increase in Media Services revenues for fiscal 2012 compared to last
year was primarily the result of recent contract wins in Latin America
and Eastern Europe as well as higher content processing revenues from
customers in France and Dubai.

Gross Margin:

The Company's total gross margin of 50.9% for the fourth quarter of
fiscal 2012 was 3.6 points lower than total gross margin of 54.5% for
last year's fourth quarter. Reviewing gross margin by business segment,
the Software segment gross margin for this year's fourth quarter of
57.0% was 3.7 points lower than the gross margin of 60.7% for the fourth
quarter of fiscal 2011. The decrease in Software segment gross margin
was primarily the result of lower service margins due to the maintenance
transaction last year, partially offset by higher advertising product
margins.

Media Services gross margin of 19.2% for the fourth quarter of this year
was 13.6 points higher than gross margins of 5.6% for the fourth quarter
of last year. The increase in gross margin between quarters was due
primarily to lower content acquisition costs.

The Company's total gross margin for the full fiscal year was 49.6% or
1.4 points lower than total gross margin of 51.0% for the same prior
period last year. Reviewing gross margin by business segment, the
Software segment gross margin was flat year over year at 56.5%; however,
the Media Services gross margin of 14.8% for fiscal 2012 was 2.3 points
lower than gross margins of 17.1% for the same prior period. The
decrease in gross margin between years was due primarily to higher
headcount costs to support recent contract wins in Latin America and
Eastern Europe.

Operating Expenses:

Total operating expenses for the fourth quarter of fiscal 2012 were
$26.3 million or $3.4 million higher than the $22.9 million of total
operating expenses incurred in the fourth quarter of last year. This
year's fourth quarter total operating expenses included $1.8 million of
expenses related to estimated earn-out liabilities in connection with
the VividLogic and eventIS acquisitions and $3.1 million of
restructuring charges.

For fiscal 2012, total operating expenses of $97.0 million were $3.4
million lower than total operating expenses of $100.4 million for the
same prior period. The decrease in total operating expenses between
periods was the result of lower domestic research and development
expenses due primarily to a reduction in headcount and as well as lower
overall restructuring charges. These reductions were partially offset by
increased general and administrative expenses related to the Company's
review of various strategic alternatives and increased earn-out related
expenses as a result of the acquisitions of VividLogic and eventIS.

The management team looks forward to the earnings call on Thursday,
March 29, 2012 at 8:30 a.m. E.T.